Nafta Rewrite Eases Threat of Auto Tariffs on U.S. Economy

The successful rewrite of the North American Free Trade Agreement lifts a cloud hanging over a significant portion of the U.S. consumer economy by eliminating a Trump administration threat of 25% tariffs on auto imports from Mexico and Canada, two of the biggest sources of cars sold in the U.S.

During the final stages of the Nafta negotiations, which culminated over the weekend in the new U.S. Mexico Canada Agreement, or USMCA, President Trump repeatedly threatened to impose the stiff auto tariffs if the countries couldn’t come to an agreement. The threats raised concerns among automobile industry executives and economists who cautioned that widespread damage would result if tariffs were applied to the roughly $360 billion in autos and auto parts that the U.S. imports each year.

In agreeing to the revised treaty, Mexico and Canada secured side agreements that would largely exempt them from the tariffs, should they take effect on imports from other countries. Similarly, the threat of tariffs has also spurred the European Union and Japan to step up their trade talks with U.S. negotiators.